An angry and disappointed consortium led by Goldman Sachs abandoned its attempt to challenge Ferrovial's £10.3bn takeover of Britain's dominant airport operator, BAA, yesterday after the Spanish bidder built up a 29% blocking stake.

Over two days, Ferrovial's adviser, Citigroup, has spent nearly £3bn buying BAA shares on the open market to thwart any rival offer. Goldman Sachs threw in the towel late yesterday, despite insisting that it could have offered investors a better deal than Ferrovial's 950.25p-a-share bid.

The US investment bank indicated that it was prepared to pay at least 955p. BAA turned it down on the grounds that its pledge lacked certainty, was subject to due diligence, and would need the green light from other consortium members, including Australia's Commonwealth Bank.

City sources said Goldman Sachs bankers were furious that they were prematurely halted from carrying out due diligence on BAA on Monday afternoon, prior to the completion of an auction of the firm in the evening - an allegation that BAA denies. Goldman also vigorously objected to a £115m break fee attached to Ferrovial's takeover of BAA, although the Takeover Panel has rejected its complaint.

On a day of confusion, Goldman issued an early-morning statement urging investors not to sell their shares to Citigroup, insisting that it was "in discussions" with the BAA board about a higher offer. But 20 minutes later, BAA flatly contradicted this, saying: "The board of BAA informs shareholders that talks between BAA and a consortium including Goldman Sachs' Infrastructure Group have ceased."

Hours later, Goldman Sachs conceded defeat, announcing: "The consortium, including Goldman Sachs' Infrastructure Group, confirms that discussions with the board of BAA have ceased. Accordingly, the consortium announces that it will not proceed with an offer for BAA."

With no remaining impediments, Ferrovial's offer is almost sure to be accepted by shareholders in time for its June 26 deadline. The Spanish company will take ownership next month of BAA's airports, which include Heathrow, Gatwick, Stansted, Edinburgh and Glasgow. It already operates Bristol and Belfast City airports. BAA's shares slipped 7p to 928p.